Most Insurance Won't Cover Mold Damage

Add mold to the growing list of household hazards
that insurers won't cover.

After suffering steep losses relating to mold-related claims
between 2001 and 2003, property and casualty insurers moved quickly
to restrict coverage for mold damage in states such as California,
Texas and Florida, where heat and humidity create an ideal breeding
ground for mold.

Now those coverage cutbacks are spreading to the Northeast,
Midwest and other areas of the U.S. More consumers are receiving
notices from their insurers informing them that mold is being
excluded from standard policies, unless the damage is a direct
result of a water-related events that are covered under their
policies. Currently, some 44 states have such exclusions, according
to the Insurance Information Institute, a trade group based in New
York.

As a result, homeowners must decide whether to pay extra for mold
insurance "riders" that provide additional coverage, or take
responsibility for preventing the spread of mold in their homes on
their own. This week, I look at some things homeowners can do now to
limit their exposure to mold-related damage.

Keeping Mold at Bay

Amid the confusion, many homeowners may take the "better safe
than sorry" route and sign up for additional coverage to protect
against mold. But generally that's a bad idea. Mold riders on
standard insurance policies can be expensive, and insurers typically
set low ceilings for claims.

Wayne Holdredge, a principal at Tillinghast, the
insurance-consulting arm of Towers Perrin in St. Louis, says the
cost of additional coverage for mold damage ranges widely, depending
on the insurer and the homeowner's location.

"I've seen costs as low as $50 for an additional rider up to
$1,400 or more with [fees]," he says.

Coverage caps also vary, but generally claims are limited to a
maximum of $25,000. But that's still far shy of the mold-cleanup
claims in Texas that averaged $35,000 in 2003.

Instead of paying extra for limited mold protection, Mike Kuhn, a
veteran home inspector and co-author of the "Idiot's Guide to Home
Inspections," says it's smarter to spend your time and money on mold
prevention.
The following are steps to prevent mold in your home and a list of detection and prevention techniques
to keep mold at bay.

Forget about mold insurance riders. Instead, spend some time being
vigilant in performing preventative maintenance and inspecting damp areas of
your home for the first sign of infestation. Here are a few steps to follow:

Repair water leaks immediately. Mold can form in as
little as 24 hours. Dry exposed area thoroughly;

Uses your senses: A damp, musty smell or particles in
the air that cause your eyes to water are signs of a mold problem. Look
for water stains on sheet rock or discolored ceilings or floor boards;

Control water and moisture in your home by keeping
indoor humidity below 60%. An air conditioner or central-air cooling
system can help;

Keep exhaust vents (or windows) open in bathrooms and
kitchens, ensure clothes-dryer exhausts are clear and keep gutters and
drains clean of debris;

Drainage and landscaping should slope away from
foundations;

If condensation forms typically often on windows, walls,
or pipes, install a de-humidifier;

An inexpensive leak-detection system (less than $25)
will set off an alarm when it senses rising water.

If you detect mold growing, clean it up immediately.
Scrub mold off hard surfaces with detergent and water, and dry the area
completely. There is more info on prevention and cleanup of mold
at the EPA's Web site (www.epa.gov/iaq/molds/preventionandcontrol.html).

If you're uncertain whether you have a mold problem, you may be
tempted to hire an air-quality expert to test your home for
contaminants. But while air-quality tests that cost between $500 and
$600 can sample the air for mold, the tests often can be misleading,
says Mr. Kuhn.

"Our industry shies away from [air testing] because what you see
may not represent what's going on elsewhere in the house," he says.
"That test may not address the issues in other inaccessible places
in the home, such as an attic or crawl space," so an all-clear
reading "can give a false sense of security to the homeowners."

Your best bet is to routinely do some thorough investigative work
on your own, checking and re-checking sources for potential leaks or
dampness throughout your home. If you find that mold is a problem
and you need professional help removing it, do some due diligence
first to ensure you get a competent, experienced removal expert.

There are no federal or state guidelines for certifying or
licensing mold remediators because the Environmental Protection
Agency and the Centers for Disease Control and Prevention are still
struggling to define what levels of mold contamination are
dangerous.

'Black Gold Rush'

In the past, protection from mold never was explicitly detailed
in standard insurance policies. Instead, mold cleanup generally was
covered as part of water- or fire-related claims.

That changed after a couple in Dripping Springs, Texas, filed a
small claim with their insurance company for water damage to a
hardwood floor in their 22-room mansion. The claim later grew to
include allegations of rampant mold contamination throughout the
home and health problems resulting from the mold, which the couple
blamed on the insurer's mishandling of the original cleanup
project.

In 2001, the mansion's owners, Melinda Ballard and her husband,
Ron Allison, were awarded $32 million after a jury found their
insurer, Farmers Insurance Group, at fault. The award later was
reduced to $4 million by a state appellate court, and the couple
settled out of court for an undisclosed amount.

"When a home has been so infested with very aggressive wood- and
sheetrock-eating mold that the structure of the home has actually
been compromised, it can be financially devastating to a family,"
says Ms. Ballard. The battle with her insurer prompted her to launch
Policyholders of America, a consumer advocacy group in Austin,
Texas.

The couple had the contaminated home bulldozed two months ago.

Jose Montemayor, insurance commissioner for the state of Texas,
says the couple's multimillion-dollar court award resulting from its
mold claim set off a "black gold rush." The average number of mold
claims in Texas grew tenfold in the space of just two years, says
Mr. Montemayor. And as mold-related claims increased exponentially,
insurers in turn drove homeowners' premiums through the roof as they
struggled to stem losses.

Soaring claims and growing losses had a chilling effect on the
industry, causing most insurers to explicitly limit or suspend
coverage of mold-related claims in homeowners' policies.

"The insurance companies lobbied their state regulators for
premium increases based on what they perceived to be their liability
from these mold claims, and they got their wish," she says. "Then
[the insurers] said they wouldn't cover mold claims anymore, and
guess who's stuck with the raised rate? The consumer."

Texas state legislators passed reforms in September 2003 aimed at
lowering sky-high premiums there after cutbacks in coverage by
insurers helped stem the flood of mold-related losses. All but two
of the insurance companies, State Farm and Farmers Insurance, doing
business in Texas are complying, with premium reductions ranging
from 1% to 32%, according the state commissioner's office. The other
two insurers are disputing the reforms in court.

If your insurer is cutting back or limiting your coverage on
mold-related claims, lobby your state insurance commissioner to do
something about providing relief in your state. Also, you can file a complaint
with your state insurance commission.